Five Investments for a Tough U.S. Stock Market

Tony Sagami | Tuesday, July 15, 2008 at 7:30 am

The U.S. stock market has been pretty darn ugly, and if you ask me, it’s going to get even uglier.

You could go looking for the few stocks that could buck the trend and go higher in spite of the bear market, but that is harder than finding a needle in a haystack. And even companies with strong business models, defensible niches, and great products are going to struggle.

The common problem all U.S. companies are facing now is a deteriorating economic backdrop. Between the sub-prime crisis, a struggling real estate market, $140-a-barrel oil, rising inflation, and a business slowdown … there’s a lot of trouble out there.

Meanwhile, Asian economies are showing no sign of slowing down. That is why I continue suggesting paring down your holdings in the vulnerable American economy and getting a bigger stake in rapidly growing Asian companies.

With that in mind, today I want to give you five ways to invest in Asia. But first, let’s look at …

Three Asian Industries ThatLook Absolutely Unstoppable!

As an investor, you get to put your money to work in practically any kind of business imaginable. So, here’s an important question: What kind of businesses in Asia look poised to grow most?

In my opinion, the following three areas look ripe for gains …

Mega-Growth Asian Industry #1 — Construction: You need look no further than China to understand why this industry has such great prospects. The country is throwing up giant skyscrapers … paving new roads … and building new power plants.

Maybe you think it’s too late to get in? Well, if anything, I think activity will pick up — not slow down — after the 2008 Olympics later this summer.

In fact, I believe there is still at least 10 years left in the Asian construction boom.

Example of a stock in this industry: E-House, the Century 21 of China.

Mega-Growth Asian Industry #2 — Cargo and Containers: One trip to Wal-Mart will prove that China has become the world’s manufacturing center. Today, just about everything on store shelves was made in China (or some other Asian country).

But it’s hard to consistently figure out who will make the next hot product. That’s why I like companies involved in transporting the goods from factory floors to store shelves.

You have many choices here. You can buy shares of companies that run China’s toll roads … railroad companies … or port operators.

Mega-Growth Asian Industry #3 — Chuppies: Asia is all about consumption. Every time I visit, I’m bowled over by the sheer volume of shopping going on. I’m not talking about people buying crappy t-shirts, either.

Chuppies are spending like mad and make U.S. yuppies look like cheapskates. So investing in companies that cater to them can be very profitable.

Example of a stock in this industry: LVMH Holdings.

Now that you know where I see the strongest growth in Asia, let me give you …

Five Ways to Get a Bigger Stake in Asia’s Booming Growth

#1. Exchange traded funds: If you aren’t comfortable investing in individual stocks, you should consider ETFs or exchange traded funds.

They have become very popular because they can give you a diversified stake in a particular sector, index or country in one shot … including Asia. Examples:

Claymore/AlphaShares China Small Cap Index ETF (HAO)

iShares FTSE/Xinhua China 25 Index Fund (FXI)

NETS Hang Seng China Enterprises Index Fund (SNO)

PowerShares Golden Dragon Halter USX China Portfolio (PGJ)

SPDR S&P China ETF (GXC)

#2. Mutual funds: ETFs are great, but don’t forget about traditional, actively-managed mutual funds, either. They’re also a great way to get a diversified stake in Asia’s best companies.

Some of my favorites:

U.S. Global’s China Region Opportunity (USCOX)

Fidelity’s China Region (FHKCX)

T. Rowe Price’s New Asia (PRASX)

#3. Chinese companies on U.S. exchanges: Did you know that more than 100 Chinese companies are listed on the New York Stock Exchange? In fact, some of the largest and most profitable companies in all of China can be found on U.S. exchanges!

My Asia Stock Alert subscribers, for example, own China Mobile (CHL), China BAK Battery (CBAK), and New Oriental Education (EDU), all of which trade right here in the U.S.

#4. Chinese companies on foreign exchanges: If you’ve never bought a stock on a foreign stock exchange, you’ll be surprised at how easy it is. All you need is a broker with an international trading desk and the ticker symbol of the stock.

Dozens of very attractive Chinese companies are listed on the Hong Kong Stock Exchange, and some can also be found on the exchanges in Singapore, Canada, and London.

#5. U.S. companies doing big business in China:U.S. companies have been doing business in overseas markets for a long time. But these days, some American firms are getting the bulk of their revenues from outside the U.S.

For example, both Yum Brands (runs Pizza Hut, Taco Bell, and KFC) and Las Vegas Sands (NYSE: LVS) garner more than half of their sales from outside the U.S.

Bottom line: Even carefully selected U.S. companies can give you very significant exposure to Asia.

Which of these investments is right for you? The answer depends on a lot of things, including how aggressive you are, whether you’re more of a do-it-yourselfer, and how focused you want to get.

But no matter what, I think you should take a serious look at increasing your stake in Asia because I think the region’s shares can help your portfolio weather the downturn happening here in the U.S.

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates
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